Student Lender Not Actually Sure if Direct Lending Will Cut Jobs

Student lender Sallie Mae is very worried about the switch to direct lending that will result from passage of the Student Aid and Fiscal Responsibility Act (SAFRA). One of Sallie Mae’s major lobbying points is that the change to direct lending will cut American jobs. Well it turns out Sallie Mae isn’t just lobbying congress; it also appears to have been lobbying its own employees. According to an article by Pedro de la Torre III and Erin Rosa at Campus Progress:

While managing loan collections, two employees at the Muncie, Ind., office of Student Assistance Corporation (SAC), a Sallie Mae subsidiary, learned that they were in the middle of a political battle that pitted Sallie Mae against proponents of SAFRA….

One former worker at SAC, who requested to remain anonymous… recalls the lending giant would send out e-mails to pressure employees into collecting signatures for an anti-SAFRA campaign. “It was quite pressure-filled. They had e-mails every day on how many teams [at the company] had how many signatures, who was doing well and who wasn’t,” he says.

It’s probably worth pointing out that SAFRA might still be a good idea in the long run even if Sallie Mae has to cut jobs. The bill will certainly save money and generate more funds for actual financial aid. Still, the accuracy of the jobs loss scare is questionable. Direct lending might actually be creating more jobs.

In fact, even Sallie Mae doesn’t appear to be sure if direct lending will hurt jobs. A year ago, according to the Campus Progress article, Sallie Mae told an Indiana paper it wasn’t planning to eliminate any jobs:

Despite President Barack Obama’s intention to end government subsidies for student loan companies, a spokesman for Sallie Mae said she doesn’t expect the lender’s local office to be affected.

“Sallie Mae proudly employs more than 725 Hoosiers in Muncie,” spokesman Martha Holler told the Star Press. “Our plans there remain unchanged.

What’s really going on here?

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer